Microsoft Grew by How Much?

In this issue of the Peel:

• ?? Big Tech companies have reported earnings—are you buying?
• ?? UPS hasn’t delivered either my packages or its revenues…
• ?? For the first time in 9 months, average housing prices have dropped!

Market Snapshot ??

Banana Bits ??

• Consumers are hyped as confidence reaches highs since December 2021
• We are approaching dotcom-era levels of index concentration
• This near-AI pure play lived up to lofty expectations last quarter
• No idea how this is calculated, but Travis Kelce’s girlfriend has allegedly brought in $331mn in value to the soon-to-be Super Bowl losers

Paradise: A World Without VDR?Invoice?Shock

“WTF? How did the VDR bill get so high?!”

It’s not something anyone expects to say. And yet there’s a real chance that somewhere in the world, someone is saying something a lot like it right now. The reason is simple: unnecessarily complex VDR pricing models.

Pay per page? Per gigabyte? Per month? Per user? Does it really have to be this hard?

No, it really doesn’t.

All it takes to avoid the trap (and the shock that comes with it) is to go with a truly transparent VDR provider. Yes, they exist—and SRS Acquiom can help.

A great place to start is with this brief overview of what to look for—and what to steer clear of—in your search for the right VDR partner.?

Efficient functionality, secure storage, and consistent service levels are all no-brainers when it comes to selecting a VDR. Transparent, flat-rate pricing belongs on that list, too.

Start your journey to paradise.

Macro Monkey Says ??

Earnings Spotlight: Big AI

Well, that was fun while it lasted…

As of yesterday’s close, Microsoft is (was?) the only company in the world with a market cap of over $3tn. Following their earnings report, we’ll find out at the open if they join Apple in the $2.9tn club once again (how pathetic!).

?

But Microsoft wasn’t the only Titan of Technology to report earnings yesterday.

?

Alphabet and AMD got in on the fun, too, and while one of these things is very much not like the others, taken together, we get a glimpse of how some of the world’s most important AI firms were doing one year after the launch of ChatGPT.

?

Microsoft:

The world’s most valuable company killed it in the last quarter of 2023.

Net income saw its highest growth in over 2 years during the period, climbing a massive 33% to $21.9bn, largely thanks to increased AI demand within the firm’s cloud unit.

Azure, Microsoft’s cloud unit and the most important line item to analysts relevant to this company, spiked 30% against estimates for 27% acceleration. Every single segment saw growth last quarter, too, as we can see below (shoutout to CNBC)

Source

?

This was also Microsoft’s first quarter that fully incorporated revenue from the now-completed acquisition of Activision Blizzard. Overall revenue grew 18% for the quarter, with 4% of that growth coming from the newly acquired game developer.

Copilot, Microsoft’s AI tool that experts call “significantly more advanced” than competitive products, helped drive strong growth in the firm’s Office 365 unit as well.

?

Alphabet:

Google’s biggest realization with the release of this quarter’s report must be, “Hmm, maybe we shouldn’t report at the same time as Microsoft…”

The (formerly?) $1.9tn firm beat earnings, too, but investors were much more brutal to this tech giant. Underperformance in AI compared to the Big Daddy above, along with disappointing performance in Google Ads, dragged on sentiment.

?

Headline earnings and revenue both beat estimates, but the firm’s puny little $65.5bn in Google ad revenue came up ~$400mn short of expectations.

YouTube ads also missed estimates at $9.2bn when analysts were looking for $9.21bn… and that’s hard to believe given how many times I’ve tried to smash my phone over the last 3 months when they ruin videos with yet another ad.

Anyway, 13% total revenue growth was the fastest since 2022, but the firm is still getting its lunch eaten by the likes of Meta and the new kid on the block, TikTok.

Source

?

Google’s cloud unit, creatively called Google Cloud, grew faster than expectations at 26%.

The firm’s most capable LLM, Gemini, was only launched in December, but CEO Sundar Pichai emphasized the firm’s investment in this new tech as Google’s primary growth engine.

?

Advanced Micro Devices (AMD):

Competing with the kind Nvidia, the bar was high for AMD last quarter, but CEO Lisa Su & Co. was able to deliver.

The semiconductor firm reported $0.77/sh on $6.17bn, eking out a beat vs the $0.77/sh and $6.12/sh expected.

The problem came in first quarter guidance, where AMD projected only $5.4bn while analysts were looking for at least $5.7bn.

Competing directly with Nvidia in their Data Center segment, AMD saw 38% growth here to $2.28bn in total sales, making this segment now officially the firm’s largest segment of revenue.

?

The Takeaway?

At the risk of stating the obvious, artificial intelligence is clearly a massive driver of business expansion going forward. But, at these early stages of practical application, only the very best of the best are getting paid for it as of now.

?

Microsoft was the only one of these names to lose less than 1% after hours following its report. Google was off more than 5.7%, while AMD had fallen 6.5% by 8 pm EST.

More big tech names will join the party on Thursday as Apple, Amazon, and Meta all step up the plate.

Nvidia, the elephant not in the room, is way too cool to report alongside these absolute losers, so we’ll have to wait until late February to get a look at them.

As always, stay tuned.

What's Ripe ??

MSCI Inc. (MSCI) ??9.3%

• Volatility breeds volatility, and while most of us hate it, some of us just ride the wave. But few are able to surf better than MSCI.
• The index and analytical tools provider led the day for the S&P on strong earnings, posting $3.68/sh on $690.1mn—both blowing by estimates.
• Portfolio customization driven by RIA clients was another key factor in Q4 outperformance. You wanna invest in it? MSCI’s (probably) gotchu’.

General Motors (GM) ??7.8%

• Investors got their engines revved (but notably, not their batteries charged) on Tuesday as GM drove past expectations in the fourth quarter.
• The 116-year-old company delivered $1.24/sh on sales of $42.98bn, both cruising past expectations. Guidance for 2024 was even better. Speaking of Cruise…
• GM’s majority-owned self-driving unit is still under investigation after the Oct. 2nd accident that killed a pedestrian. Meanwhile, Tesla just released FSD v12…

What's Rotten ??

United Parcel Service (UPS) ??8.2%

• Like their packages last quarter, UPS did not do a good job delivering on earnings. Declining volumes and 12k layoffs really killed the vibe.
• UPS reported $2.47/sh on $24.9bn in sales vs estimates for $2.45/sh on $25.4bn. A slight miss but lethal when investors are concerned about demand.
• Package volume dropped 7.4%-8.3% in the U.S. and abroad, with CEO Carol Tomè calling 2023 a “difficult and disappointing year.” At least she’s honest.

JetBlue (JBLU) ??4.7%

• JetBlue has been flying high ever since they cut ties with that broke bum Spirit. But, after showing what was under the hood, turbulence hit hard.
• Shares entered a mild descent on Tuesday as the firm projects rising costs with revenue growth lower than my expectations for Kanye’s next album.
• Losses in Q4 fell to $0.31/sh on a GAAP basis, while adjusted EPS of $0.19/sh beat the expected $0.27/sh loss. Operating revenue fell 4% annually, too.

Thought Banana ??

Home Prices Head For Winter?

Pack your bags, young apes—it’s finally time to move out of Mom and Dad’s basement!

You guys remember November 2023, right?

A long time ago, I know. Back then, Bill Belichick was still the Patriots’ head coach, the GOAT Charlie Munger was still blessing the world with his living presence for most of the month, and I really still thought I could pull off a full “dry January.”

?

Unfortunately, none of those things worked out too well, but the price of not being homeless actually did… for once.

?

Cooling With The Season

Heading into winter here in the northern hemisphere, home prices followed thermostats in cooling down just a bit in November.

For the first time in 9 months, the average price of a house in the U.S. fell on a monthly basis, even though it was only by 0.2%.

The most ridiculous thing here is obviously that the primary home price indicator in the U.S. still operates on a 2-month lag, but maybe blockchain fixes this, too.

For now, we’ll go with it. While 0.2% isn’t much for.. anything, the fact that home prices actually can go lower outside of 2022’s rate-hike-nuclear-bombing campaign ought to give us renters and basement-dwellers some hope.

Still, prices accelerated 5.1% from November 2022, an uptick from the 4.7% annual increase in home values seen in October.

Source

?

The Takeaway?

This might be controversial, but home prices appear to be rate-agnostic at this point. Changes in home prices are much more linked to one simple metric: housing supply.

?

2023 saw the lowest number of existing home sales in the U.S. since 1995. I didn’t even know people were alive back then, but homeowners with low-rate mortgages locked in before Fed Chair JPow froze the market remain stubborn to sell.

Source

?

Of course, housing is an incredibly regional asset class as well. Cities like San Francisco and Seattle saw the strongest declines in home prices, falling 1.3% and 1.4% monthly, respectively.

?

Cities like Detroit saw the highest annual gain, rising 8.2%, as Americans apparently want to live where all the winning football teams are (RIP to the Lions now, though).

?

Miami, Tampa, Atlanta, Charlotte, Cleveland, and the Big Apple all reached all-time highs in their home values.

?

So, while it might be time to move out of Mom and Dad’s, the primates in Portland are gonna have a much different experience than the southern apes among us.

?

Maybe we all just pool our money (or lack thereof) and move in together?

?

?? The Big Question ??: If rates move lower in the U.S. this year, will home prices follow as current homeowners won’t be forced to triple their rates? Will building come back strong enough to increase the housing supply soon?

Banana Brain Teaser ??

Yesterday ??

The price of a certain stock increased by 0.25 of 1 percent on a certain day. By what fraction did the price of the stock increase that day?

Answer: 1/400

Today ??

For each trip, a taxicab company charges $4.25 for the first mile and $2.65 for each additional mile or fraction thereof. If the total charge for a certain trip was $62.55, how many miles at most was the trip?

?

Send your guesses to [email protected]

Wise Investor Says ??

“Be stubborn on vision, but flexible on details.” — Jeff Bezos

How Would You Rate Today's Peel??

?? All the bananas ? ? ? ? ? ? ? ? ? ? ? ? ??? Meh ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? Rotten AF

?

Happy Investing,

David, Vyom, Jasper & Patrick